Insurance Principles

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Main principles of Insurance:

 Utmost good faith

  Indemnity
  Subrogation
  Contribution
  Insurable Interest
  Proximate Cause
Utmost Good Faith (Uberrimae
Fides)
  the insured must reveal the exact
nature and potential of the risks that
he transfers to the insurer, while at
the same time the insurer must make
sure that the potential contract fits
the needs of, and benefits, the
insured.
 Indemnity

 On the happening of an event insured

against, the Insured will be placed in the
same monetary position that he/she
occupied immediately before the event
taking place.  In the event of a claim the
insured must:
  Prove that the event occurred
  Prove that a monetary loss has occurred
  Transfer any rights which he/she may have
for recovery from another source to the
Insurer, if he/she has been fully
indemnified.
Contd…….
 Prove that the event occurred
  Prove that a monetary loss has
occurred
  Transfer any rights which he/she
may have for recovery from another
source to the Insurer, if he/she has
been fully indemnified.
 Subrogation

 The right of an insurer which has paid

a claim under a policy to step into the
shoes of the insured so as to exercise
in his name all rights he might have
with regard to the recovery of the
loss which was the subject of the
relevant claim paid under the policy
up to the amount of that paid claim.
The insurer’s subrogation rights may
be qualified in the policy.
 In the context of insurance subrogation is a
feature of the principle of indemnity and
therefore only applies to contracts of
indemnity so that it does not apply to life
assurance or personal accident policies. It
is intendedto prevent an insured recovering
more than the indemnity he receives under
his insurance (where that represents the
full amount of his loss) and enables his
insurer to recover or reduce its loss. 
 Contribution

 The right of an insurer to call on other

insurers similarly, but not necessarily
equally, liable to the same insured to share
the loss of an indemnity payment i.e. a
travel policy may have overlapping cover
with the contents section of a household
policy.  The principle of contribution allows
the insured to make a claim against one
insurer who then has the right to call on
any other insurers liable for the loss to
share the claim payment.
 Insurable Interest

 If an insured wishes to enforce a contract

of insurance before the Courts he must
have an insurable interest in the subject
matter of the insurance, which is to say
that he stands to benefit from its
preservation and will suffer from its loss.
In non-marine insurances, the insured must
have insurable interest when the policy is
taken out and also at the date of loss giving
rise to a claim under the policy.
 Proximate Cause

 An insurer will only be liable to pay a

claim under an insurance contract if
the loss that gives rise to the claim
was proximately caused by an
insured peril. This means that the
loss must be directly attributed to an
insured peril without any break in the
chain of causation
 THANK YOU